PG Stock: Why This Dividend-Paying S&P 500 Giant Should Be on Your Shopping List!
20 Luglio 2021 - 10:58PM
Finscreener.org
Large-cap stocks such as The Procter & Gamble Company (NYSE:
PG) might seem a boring investment, but sometimes that’s what
your portfolio needs. The equity markets continue to trade near
all-time highs despite rising COVID-19 cases in several parts of
the world and the threat of another economic lockdown, especially
if things spiral out of control.
In case markets turn turbulent overvalued growth stocks will
grossly underperform the market. Alternatively, blue-chip stocks
such as Procter & Gamble will be relatively immune to economic
shocks given its low beta score of 0.42.
A Dividend Aristocrat
Procter & Gamble has a wide portfolio of consumer products
across categories making it one of the largest companies in the
world. Valued at a market
cap of $343 billion and an enterprise value of $365 billion.
P&G reported close to $71 billion in sales and over $15.7
billion in operating income last year. PG stock is part of the
S&P
500 as well as the Dow
Jones Industrial Average, two of the most popular indexes in
the world.
P&G’s resilient business has allowed the company to
increase its
dividends for 64 consecutive years. PG stock currently provides
investors a quarterly dividend of $0.87 per share indicating a
forward yield of 2.5% which is significantly higher than the
10-year Treasury yield of 1.6%.
The company’s products are sold to a staggering five billion
consumers worldwide. In the past two decades, P&G has
expanded its product line and has diversified weaker brands as
well. Due to massive consumer reach, P&G’s organic revenue
remains stable while it continues to focus on cost optimization
strategies and share repurchases to boost its bottom line.
For example, Procter & Gamble has increased its adjusted
earnings per share from $3.67 in 2019 to $5.12 in 2021. Now, Wall
Street has forecast earnings to grow at an annual rate of 9% in the
next five years.
PG stock has room to increase dividends
In the last four quarters, P&G has spent around 50% of
its free cash flow on dividend payouts. This low payout ratio
suggests investors can expect
dividend hikes from this S&P 500 giant going ahead as
well. In the last three quarters, its adjusted free cash flow
increased by 19% year over year to $12.4 billion.
At the end of fiscal 2020 (ended in June), the company had
forecast it would spend around 90% of adjusted free cash flow on
share repurchase programs and dividends. It has also managed to
decrease its outstanding share count by 11% in the last 10 years
which has supported EPS growth for P&G.
After you account for dividend reinvestments, PG stock has
returned 195% to investors in the past decade. Comparatively, the
S&P 500 has risen by almost 300% since July 2021 while the
Dow Jones 30 is up 244% in this period.
However, consumer product companies such as P&G are
considered defensive plays, and in case fears of a resurgence in
COVID-19 cases come true, these stocks could experience an uptick
in prices driven by a boost in demand, as we saw in 2020. In fact,
PG stock rose 23% between March and October 2021. Comparatively,
the S&P 500 and Dow Jones 30 gained 12% and 5.6% in this
six-month period.
As the pandemic kept people at home, demand for consumer goods
began to soar, driving the rally in P&G and its peers.
The verdict
Procter & Gamble leads the consumer goods market and its
brand positioning has allowed the company to generate predictable
cash flows and consistent profits. When you combine its leadership
position with its strong balance sheet, we can why PG stock remains
ideal for equity investors.
Grafico Azioni Procter and Gamble (NYSE:PG)
Storico
Da Feb 2024 a Mar 2024
Grafico Azioni Procter and Gamble (NYSE:PG)
Storico
Da Mar 2023 a Mar 2024